We are familiar with money, i.e., notes and coins, as a medium of exchange – an intermediary instrument use to facilitate transactions. I make a TV, sell it for money, and then use it to buy a pair of shoes. Money becomes a medium of exchange because all of us put our trust in its reliability. The Central Bank issues these notes and coins, and makes them legal tender. Legal tender means that the medium of exchange is recognised by law to be valid for meeting a financial obligation.

With advancement in technology, new virtual means of payment have emerged, such as cryptocurrency, which is a form of digital token secured by cryptography. They are not legal tender. But some people put their trust in them and use them as a means of payment. Hence, Bitcoin and Ether have been adopted by people in some communities to pay one another or to pay for goods and services.

MAS has been monitoring the use of such virtual currencies. Their use is not prevalent in Singapore – about 20 Singapore retailers like restaurants and online shops currently accept Bitcoins1. This is unlike places like Japan, where the use is more popular. Likewise, in the Singapore financial industry, use of virtual currencies as a mode of payment is not significant. Trading is generally for speculative investment purposes, and the volume is low2 compared to other countries such as US, Japan and Hong Kong.

Similar to most jurisdictions, MAS does not regulate such virtual currencies per se. However we regulate the activities that surround them if those activities fall within our more general ambit as financial regulator. Let me give two examples.

First, virtual currencies, due to the anonymous nature of the transactions, can be exploited for money laundering and terrorism financing risks. MAS is working on a new payment services regulatory framework that will address these risks.

A second example is fund-raising. Virtual currencies can go beyond being a means of payment, and evolve into “second generation” tokens representing benefits such as ownership in assets, like a share or bond certificate. The sale of such “second generation” tokens to raise funds is commonly known as an initial coin offering or ICO (“ICO”). A number of ICOs have been structured out of Singapore in recent months.

These are financial activities that falls under MAS’ regulatory ambit. Hence, on 1 August 2017, MAS clarified that if a token is structured in the form of securities, the ICO must comply with existing securities laws aimed at safeguarding investors’ interest. So the requirements of having to register a prospectus, obtain intermediary or exchange operator licences, will apply. These intermediaries must also comply with existing rules on anti-money laundering and countering terrorism financing.

MAS has not issued new legislation specifically for ICOs. We will continue to monitor the developments of such offers, and consider more targeted legislation if necessary.

Some consumers may be attracted to invest in virtual currencies and digital tokens due to their recent exponential rise in value. However, as a financial regulator, our focus is securitised interests in assets – such as shares in a company. MAS does not and cannot regulate all products that people put their money in thinking that they will appreciate in value. But recognising that the risks of investing in virtual currencies are significant, MAS and the Commercial Affairs Department have published an advisory alerting consumers to these risks, and are working together to raise public awareness of potential scams.